An analytical model for the assessment of airline expansion strategies

Purpose: The purpose of this article is to develop an analytical model to assess airline expansion strategies by combining generic business strategy models with airline business models. Design/methodology: A number of airline business models are examined, as are Porter’s (1983) industry five forces that drive competition, complemented by Nalebuff and Brandenburger’s (1996) sixth force, and the basic elements of the general environment in which the expansion process takes place. A system of points and weights is developed to create a score among the 904,736 possible combinations considered. The model’s outputs are generic expansion strategies with quantitative assessments for each specific combination of elements inputted. Originality/value: The analytical model developed is original because it combines for the first time and explicitly elements of the general environment, industry environment, airline business models and the generic expansion strategy types. Besides it creates a system of scores that may be used to drive the decision process toward the choice of a specific strategic expansion path. Research implications: The analytical model may be adapted to other industries apart from the airline industry by substituting the element “airline business model” by other industries corresponding elements related to the different specific business models.Peer Reviewe

An Assessment of the Expansion Strategy followed by Avianca Airlines: Period 2008-2012

Purpose: This article aims to apply to the case of Avianca Airlines the Analytical Model for the Assessment of Airline Expansion Strategies developed by Moreira (2014) in order to explain the rationale of the expansion strategy followed by this airline and indicate other possible expansion strategies. Design/methodology/approach: This article is a case study in the sense that it aims to arrive to broad generalizations based on the collected evidences, focusing on one of the most traditional airlines in the world. This article is a positivist case study, based in the positivist understanding; because it is supported by objective facts of the situation which are informed by the researcher’s interpretive understanding according to it is recommended for this type of study. Findings: The application of the Analytical Model for the Assessment of Airline Expansion Strategies above referred was successful, considering that the model was able to explain a wide range of complex aspects of the Avianca’s development. Thus, being one of the oldest airlines in continued operation in the world, the expansion process of this airline is connected to many political, sociological and economic facets - ie., its general environment - of its mother country, Colombia. The analytical model offered the opportunity to explore these issues in a detailed manner, adding a broader comprehension of this airline that goes beyond its operating and economic analysis.Originality/value: They reside on the fact that this is the first time that this analytical model is applied to study extensively an actual situation. Besides, airlines in Latin America have not been widely covered by the academia and this is an opportunity to begin to fill this gap. Furthermore, the referred analytical model is applicable to organizations or firms that operate in other industries if the proper adjustments are made. Implications: The implications for the academic research are to understand that the reasons for the success or failure of an airline in an expansion process may be explained by the suitability between the expansion strategy followed by this airline, its business model, its operating environment and its general environment. Moreover, this article demonstrates that the analysis of the suitability of the expansion strategy followed by a specific airline may be made in the light of a solidly founded analytical framework.Peer Reviewe

A Method for High Level Assessment of the Aeronautical Infrastructure Efficiency

Purpose: The aim of this article is to analyze the evolution of fuel consumption efficiency of the domestic flights in Brazil along the period 2000-2015 in order understand the overall efficiency of the aeronautical infrastructure in this country. Design/methodology: This article proposes a method for high level assessments of the aeronautical infrastructure efficiency (either on ground or airspace) in a fast and easy to grasp manner, using the key performance indicator of useful distance per flight hour. The method estimates the average flight time spent by the national carriers to accomplish the average stage lengths in each year of the period 2000-2015 and compare these results with the flight time baseline included in the flight planning data of the aircrafts composing the Brazilian commercial aircraft fleet. Findings: This approach leads to huge differences between the referred results and the fuel consumption shown by flight operations manuals and were attributed to the inefficiencies existing in the acknowledged overloaded aeronautical infrastructure (either in the air or on ground) in Brazil. With that it is concluded that there is a potential reduction opportunity of almost 30% in aircraft fuel consumption in domestic flights in Brazil, which has been until the moment almost unconsidered. Thus, government policy-makers and all stakeholders will be able to quantify the impacts and recommend investments in infrastructure in a well-founded way. Furthermore, the return on investments of public funds, which are especially scarce in the developing countries, will be assessed in a simple manner. Under this scope investments and research on Air Traffic Management (ATM) new technologies and flow management techniques are strongly suggested in order to improve airspace operational efficiency. Originality/value: A new and innovative method for high level assessment of the aeronautical infrastructure efficiency.Peer Reviewe

An analytical model for the assessment of airline expansion strategies

Purpose: The purpose of this article is to develop an analytical model to assess airline expansion strategies by combining generic business strategy models with airline business models. Design/methodology: A number of airline business models are examined, as are Porter’s (1983) industry five forces that drive competition, complemented by Nalebuff and Brandenburger’s (1996) sixth force, and the basic elements of the general environment in which the expansion process takes place. A system of points and weights is developed to create a score among the 904,736 possible combinations considered. The model’s outputs are generic expansion strategies with quantitative assessments for each specific combination of elements inputted. Originality/value: The analytical model developed is original because it combines for the first time and explicitly elements of the general environment, industry environment, airline business models and the generic expansion strategy types. Besides it creates a system of scores that may be used to drive the decision process toward the choice of a specific strategic expansion path. Research implications: The analytical model may be adapted to other industries apart from the airline industry by substituting the element “airline business model” by other industries corresponding elements related to the different specific business models.Peer Reviewe

An analytical model for the assessment of airline expansion strategies

Abstract Purpose: The purpose of this article is to develop an analytical model to assess airline expansion strategies by combining generic business strategy models with airline business models. Design/methodology: A number of airline business models are examined, as are Porter's (1983) industry five forces that drive competition, complemented by Nalebuff and Brandenburger's (1996) sixth force, and the basic elements of the general environment in which the expansion process takes place. A system of points and weights is developed to create a score among the 904,736 possible combinations considered. The model's outputs are generic expansion strategies with quantitative assessments for each specific combination of elements inputted. Originality/value: The analytical model developed is original because it combines for the first time and explicitly elements of the general environment, industry environment, airline business models and the generic expansion strategy types. Besides it creates a system of scores that may be used to drive the decision process toward the choice of a specific strategic expansion path. Research implications: The analytical model may be adapted to other industries apart from the airline industry by substituting the element "airline business model" by other industries corresponding elements related to the different specific business models

Varig case: the downfall of a Brazilian icon

Purpose: This article aims to examine the reasons of strategic nature that led Varig, the traditional 80 year-old Brazilian flag carrier, to a decadence process, which, in 2006, put a doubt over the continuity of its operations. Design/methodology/approach: To accomplish to this purpose the case study investigative methodology was applied and official sources were consulted, such as annual reports, previous studies and electronic documents at Civil Aviation Department. In parallel, direct observation was also used, which was possible because at the time the authors were executives of GOL, which was another Brazilian airline. Findings: The main reasons identified were the environmental change occurred in the international and domestic scenarios, increasing sector competition; the peculiarities of its corporate governance; and the internal contradictions and its lack of capability to react to environmental changes. Originality/value: No other studies covering the decadence and the last days of Varig had been written before and the fulfillment of this gap may be useful to understand why and how apparently invulnerable traditional and prestigious airlines can perish.Peer Reviewe

The Viability of Long-Haul, Low Cost Business Models

Recent events have confirmed the concerns that many within the aviation industry have held about the viability of the low cost business model for long-haul operations. This paper begins by reviewing the operating cost differences between low cost carriers (LCC) and legacy airlines in different regions of the world. This is followed by a summary of the various cost advantages of low cost carriers operating in short-haul markets. The main focus of the work, however, is a cost simulation involving the use of a Boeing 767-300 by both a LCC and a legacy carrier under varying operating assumptions. The research demonstrates that in none of the cases cited is the LCC cost advantage greater than 10%